Leases in PV – Part II: Legalities, Tax Aspects and Recommendations for Investors

In the first part of this special feature series, attorney Cristo Camacho, a specialist in real estate law with the law firm Gómez Pérez & Asociados, which has over 30 years of experience in the region, shared the essential clauses that lease agreements must contain to protect both owners and tenants in the context of the Puerto Vallarta real estate market.

In this second part, our specialist continues his analysis by reviewing the difference between private and notarial contracts, legal and tax aspects specific to the region, conflict resolution mechanisms, common mistakes when drafting contracts, as well as key recommendations for those who purchase investment properties.

PRIVATE CONTRACT AND NOTARIZED CONTRACT

Although many people choose to make private contracts for practicality, Camacho suggests seriously considering formalizing them before a notary. “Notarizing a contract is not expensive and it can avoid many problems,” he says. This recommendation is especially relevant in situations where the value of the rent is considerable, or the lease term is extended for several years.

A notarized contract has the value of an enforceable title, which allows a lawsuit to be initiated more quickly in the event of non-compliance. This procedure can be especially useful if the tenant stops paying, if they refuse to vacate the property or if the landlord does not comply with their obligations. In addition, it provides greater legal certainty and facilitates the enforcement of guarantees.

LEGAL AND TAX ASPECTS IN JALISCO AND PUERTO VALLARTA

Although the Urban Leases Law is federal, Jalisco has local civil regulations that regulate issues such as eviction, restitution of property and the enforcement of guarantees. In addition, in Puerto Vallarta, where interaction with foreigners is constant, additional tax considerations must be considered when rents in foreign currency are agreed upon. “It is common for contracts with foreigners to be in US dollars, but they must be stipulated correctly and comply with the applicable tax legislation,” says the lawyer.

This includes being very clear on the exchange rate to be used, as well as complying with all corresponding tax obligations with SAT. Rent in dollars is not illegal, but it should be handled with care, especially when receiving payments through digital platforms.

DISPUTE RESOLUTION: MEDIATION AND ARBITRATION

Including clauses that consider mediation or arbitration mechanisms can be an excellent preventive measure. “Alternative mechanisms like mediation are very valuable and can avoid lengthy litigation,” Camacho adds. These resources allow disagreements to be resolved without the need to go to court, which saves time, money and emotional stress.

FREQUENT MISTAKES WHEN DRAFTING CONTRACTS

One of the most common mistakes that our specialist encounters is the use of generic formats or template contracts. “Each lease is unique. Using generic contracts without customization is one of the most common mistakes.”

Failure to adapt legally and practically to the circumstances of the landlord and tenant can lead to contractual gaps and future conflicts. For this reason, Camacho recommends always seeking legal advice to draft or review any lease contract.

GENERAL RECOMMENDATIONS FOR LANDLORDS AND TENANTS

To avoid problems during or at the end of the contract, Camacho shares the following recommendations:

• Always have legal advice when drafting or signing a contract.
• Do not use generic templates downloaded from the internet.
• Establish clear, specific clauses adapted to the type of lease.
• Document the condition of the property with inventory and visual evidence.
• If possible, formalize the contract before a notary.

“Signing a contract without legal advice can open the door to many risks,” he stresses.

INVESTING FOR INCOME PURPOSES: WHAT SHOULD INVESTORS CONSIDER? 

In a market as active and vibrant as Puerto Vallarta’s, investing in rental properties can be very profitable. However, the success of one’s investment property depends on a solid legal structure from the start.

“My primary recommendation is to formalize everything and get legal advice from the beginning, which includes having personalized contracts, clarity in the terms of occupancy, tax compliance and the inclusion of clauses that anticipate possible future situations,” he adds.

A WELL-MADE CONTRACT PROTECTS EVERYONE

Leasing is now one of the most dynamic ways of participating in the real estate market in Puerto Vallarta. From landlords looking to make their properties profitable to tenants who arrive seasonally or with the intention of settling down longer term, they all share a common interest: legal certainty.

Having a clear, professional contract adapted to each lease situation is essential to avoid misunderstandings, protect assets and ensure a healthy relationship between the parties. As lawyer Cristo Camacho emphasizes, “A well-made contract protects both the owner and the tenant,” he concludes.